Tourist Spending: VAT

Earl of Clancarty Excerpts

Wednesday 24th May 2023 Lords Chamber

[Baroness Penn (Con)]

I absolutely agree with my noble friend that levels of government borrowing are high because of the impact of both the Covid pandemic and the war in Ukraine. One of the reasons that levels of debt are high is that we have provided strong support to sectors such as tourism during the difficult years of Covid, and we are also providing strong support to them to recover from the pandemic and build back visitor numbers.

[The Earl of Clancarty (CB)]

My Lords, the Minister should look at the Oxford Economics report from last year, which showed a net economic benefit from tax-free shopping. Does she not accept that this is about an ecology of tourism—not just high-end shopping but the hospitality trade, theatres, concert halls and more? The UK needs to clearly show that it is open for business, as other countries are capitalising on this failure.

[Baroness Penn (Con)]

My Lords, I would say to the noble Lord that the Government have looked very carefully at the Oxford Economics analysis, and we do appreciate that some of the costs would be offset by higher visitor numbers and their spending. However, the OBR’s and the Government’s previous analysis suggested that the offset was marginal and the policy still comes with significant fiscal costs. One of the key differences between the Government’s costings and those produced by Oxford Economics is the assumptions around additional visitor numbers, with the OBR estimating that VAT-free shopping could bring in 50,000 to 80,000 additional visitors and the industry commission report suggesting 1.6 million additional visitors.